Mexico: The Next Iraq or Afghanistan?

The Obama administration may have announced its $700 million plan to help the Mexican government fight the powerful drug cartels, but the cartels have already geared up for a battle undergoing a "transition from the gansterism of traditional narco hit men to paramilitary terrorism with guerilla tactics," according to a confidential federal law enforcement assessment obtained by ABC News.

"We have a criminal insurgency by organized crime that may well be a precursor to civil anarchy in part or all of Mexico," warns the assessment.

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U.S. officials tell ABC News that President Obama has been told the Mexican cartels have become a criminal insurgency, threatening to turn Mexico into an Iraq or Afghanistan. The powerful drug cartels have increased their use of paramilitary terrorism with guerilla tactics, including car bombs, grenades and roadside IED's.

"There is in fact an insurgency on both sides of the American-Mexican border and it's stepped up a lot in the last several years because the Bush administration ignored it and put its focus on Iraq," said ABC News counterterrorism consultant Richard Clarke.

"We have to do something now along the border, but just doing these little things that the administration announced today won't solve the problem in the long term," said Clarke.

Just last month, 15 to 20 masked gunmen in Durango, Mexico, raided the work site of a U.S. company and stole over 900 pounds of water gel explosives and detonators. Authorities are increasingly worried that these types of thefts will be on the rise and that the cartels will use the explosives to manufacture IEDs and other types of devices.

"We need more ATF agents working shoulder to shoulder with our counterparts in Mexico," said Michael Braun, former DEA operations chief.

"We obviously do need agents on our side of the border, ATF agents that are fully focused on disrupting that flow of arms heading into Mexico, and identifying those responsible for it and bringing them to justice," said Braun.

The Obama plan will add 100 new ATF agents to stop the gun smuggling, but it's a temporary assignment, only 45 days.

"I don't believe it is a long term solution," said Braun. "It's not a strategic approach to the problem and that's what we need, we need a long term strategy."

While the guns may be flowing from the U.S. to Mexico, the violence from the drug gangs may be crossing the border from Mexico to the U.S. The confidential assessment warned that U.S. gangs could be influenced by the cartels and essentially become groups of homegrown terrorists.

"U.S. Street gangs may now be, or will become, home grown Domestic Terrorists as well as key players in cross border narco-trafficking," said the report.

Clarke also warned of the potential for "spill-over".

"It happens to be an insurgency of drug lords," said Clarke. "It has all the hallmarks -- killing police, heavily armed insurgents, a government essentially not able to govern the cities and towns on the Mexican side of the border -- and it's spilling into Arizona, it's spilling into Texas."